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Scope of Cover

1. What is Export Credit Insurance?

Export Credit Insurance provides protection against the risks of non-payment involved when offering credit terms to your overseas buyers.

2. How is it different from other commercial insurances?

The subjects of insured interest under credit insurance and cargo insurance are entirely different. The former subject is “the debt” or “the current assents” whereas the latter is the “goods”, “product” or “merchandise”.

3. Does our company need any export credit insurance?

Yes. When your company is engaged in export trading on credit payment terms namely Documents against Payment (D/P), Documents against Acceptance (D/A) and Open Account (O/A), it is exposed to "non-payment" risks. Unforeseeable political, social and commercial factors can also prevent payments from your buyers to your company.

Being insured by export credit insurance, your company is protected against bad debts risks, enabling you to secure by extending more favorable terms to overseas buyers. Your capability in acquiring trade finance is also enhanced.

4. What risks are covered by ECIC Policy?

ECIC protects Hong Kong exporters against non-payment risks arising from commercial and political events.

5. Can cover be provided if the seller and buyer are related companies?

ECIC is not liable for losses arising from buyer risks in relation to in-house transactions. However, cover can be provided with respect to country risks.

6. Can my Policy apply also to shipments made by my parent/associated companies or my subsidiaries?

Yes, provided that you have applied for a joint-policy. The procedure is simple. You can send us the request in writing based on the suggested wordings. For details, please contact your account officer.

It is important that you should nominated one of the companies as the Nominated Policyholder and all documents relating to the Policy (such as signing of LA, declaration and lodging of claims) must be signed by the Nominated Policyholder.

7. Is there any price list from ECIC?

Premium rates vary from Policyholder to Policyholder depending on their portfolio of risk, such as buyer, country, length of credit, size of turnover, etc.

8. What terms of payment are insured by ECIC?

We insure all credit terms with usance not more than 180 days. These credit terms broadly include Documents against Payment (DP), Document against Acceptance (DA) and Open Account (OA). We also treat "cash against documents" and "documentary sight draft" as equivalent to DP. So if you make shipments under these terms, please declare the payment terms of these shipments as DP.

We understand that sometimes you will ask your buyer to make T.T. payment (telegraphic transfer) to you after you have made the shipment. This type of payment arrangement is also insurable by us and we treat it as OA. Please declare such shipments to us on OA term of payment."

Credit Limit

1. Are there countries or markets not covered by ECIC?

Except countries under UN sanction, ECIC covers over 200 countries all over the world.

2. How do I obtain a credit limit?

You must apply for a credit limit from us via EC-link or in other formats agreed by us.

3. Must I apply for credit limits for all of my overseas buyers?

Yes, if you are trading with your overseas buyers (except with your associates or subsidiaries) on credit terms.

If no credit limit has been established for the buyer, no claim will become payable in case of a loss incurred even if you have declared the shipments to us.

4. When must I submit a credit limit application (CLA)?

When your Policy is issued, you must apply for credit limits on all your existing credit buyers.

For new buyers, you should apply when you are seriously contemplating or actually negotiating to do business with them on credit terms. It takes time to collect the necessary credit information on overseas buyers; therefore you must allow us a reasonable time to process your CLA.

5. Why does ECIC refuse or restrict cover on my buyer?

ECIC may restrict or refuse cover on a buyer for various reasons and in a varieties of circumstances including but not limited to the situation where information on the buyer is not sufficient; when our commitments on the buyer are full; where there is a winding-up or bankruptcy petition filed against the buyer; or where the trading conditions such as the political or economical stability of the buyer’s country have changed.

We assure you that we always try to decide on credit limit as objectively and pragmatically as we can.

Claims and Recoveries

1. How do I lodge a claim?

You must lodge your claim by filling in a claim form which will be provided to you. You should give all the details and all supporting documents requested in the claim form. Incomplete documentation can seriously delay the settlement of your claim.

2. When should a clam be submitted?

A claim should be submitted within the period specified in the policy.

3. When will I get paid?

Generally speaking, claims are paid:

  • In case of insolvency or bankruptcy of buyer - as soon as practicable
  • In case of default in payment i.e. failure of the buyer to pay for the goods delivered to and accepted by him – 4 months after the due date for payment.
  • In case of repudiation i.e. failure of the buyer to take delivery of the goods - as soon as practicable after resale;
  • In cases of delays in transfer of payments – 4 months after the date of the buyer marking the deposit in local currency or 4 months after the due date for payment, whichever is the later (this may be extended for certain countries)
  • In case of any other event – 4 months after the event which causes the loss, provided that the amount of loss has been established.

4. How much will I be compensated?

If your amount of loss does not exceed your credit limit, the compensated will be the amount of loss multiplied by the percentage of indemnity.

If your amount of loss exceeds your credit limit, the compensation will be the amount of credit limit multiplied by the percentage of indemnity.

5. Factors affecting your claim

Essentially, a credit insurer needs to be satisfied that:

  • Your claim is in relation to an event of loss covered under your Policy;
  • You have an appropriate credit limit on the buyer and have declared the shipment;
  • You have complied with all the terms and conditions of the Policy;
  • And the contracts of sale between the buyer and yourselves have been properly executed by you.

6.          What is the percentage of claim payment?

ECIC undertakes to indemnify up to 90% of the losses.

7. What usual actions for minimising losses would you suggest us to take?

It depends on the circumstances of the case. Generally speaking, in the case of insolvency, it is important that you promptly register the amount the buyer owes you and other detail with his receiver/liquidator/administrator.
In the case of potential default, we suggest that you send a strongly worded letter to the buyer demanding immediate payment. You may also arrange, through your bank, to have the bills protested against the buyer if circumstances indicates that this action is worthwhile.

In the case of repudiation, you should first arrange proper storage of and insurance for the goods involved. Then you should send a written demand to the buyer to take delivery of and pay for the goods within a certain time limit. If such action fails, you should look for alternative buyer and hold the original buyer responsible for any losses incurred.

You should keep us promptly informed of your actions.

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